What science says about avoiding student debt

Kaela Lundeen offers a customer a food sample while working in the deli at Festival Foods on Sunday, September 11, 2016 in Appleton, Wisconsin. She is saving money to attend Fox Valley Technical College.(Photo: Ron Page/USA TODAY NETWORK-Wisco)

Story Highlights

Researchers say students who are prepared academically for college will find ways to pay for school.

The Wisconsin HOPE Lab tests public policies, financial aid practices to see which ones work.

Targeted messaging and emergency grants have been found to help students stay in school.

The 19-year-old Appleton woman was recently promoted to full-time at Festival Foods, working mainly evening shifts in the deli.

She's taking online courses through Coursera to keep learning until she enrolls in school.

After the new year, she applied for the fall 2017 term at Fox Valley Technical College. She waited until after the holidays because she planned a trip to western Wisconsin to see her grandmother, who is ill. The trip cost a few hundred dollars and she wanted to be sure she had enough money to cover the application before she applied.

"Hopefully by next fall I'll have enough money to get started," she said.

Lundeen is like thousands of young people in Wisconsin and across the country who believe higher education is a way to better her circumstances. She struck out on her own at 17 to escape an emotionally abusive home environment and has always wanted to attend college, but she doesn't want to put her life in hock to achieve her dream.

Among 2014 Wisconsin college graduates, 70 percent had debt — up from 60 percent a decade earlier — according to the Institute for College Access and Success. On average, they had $29,000 in debt, compared to 2004 graduates who averaged about $17,000.

Through careful planning, Lundeen hopes to keep in check the amount of student debt she acquires.

That kind of forethought and focus helps push people through school, no matter what their circumstance, said Drew M. Anderson, a postdoctoral researcher at the University of Wisconsin-Madison's HOPE Lab.

"For people who are college-ready, interested in college but don't know that they can pay for it, there's probably more financial aid than you think, although you do have to go through the process of applying to get it," Anderson said.

Scholars seek student loan answers

Researchers at the Wisconsin HOPE Lab study how people pay for college, whether college is considered affordable and how public policy affects universities, students and their families.

The lab is composed of people from various disciplines — economists like Anderson, sociologists, public policy analysts — who ask questions about college in Wisconsin and find the answers.

A few of the Wisconsin HOPE Lab's findings:

More grants don't keep students from dropping out. Anderson worked on a project that analyzed whether the Wisconsin Scholars Grant, a scholarship available to people who receive federal Pell Grants, helps people graduate from community colleges. Students who were eligible for the need-based grant were randomly chosen to receive Wisconsin Scholars Grants worth $1,800.

When the researchers tracked the recipients' paths through school, they found it didn't motivate people to continue their educations.

"Giving them additional financial aid — what does it do? The answer in this case? Not very much to change their outcomes," Anderson said.

Just providing more information doesn't help. Another theory they investigated was over-borrowing — the idea that people borrow too much money because they don't realize how much they need or don't understand how student loans work. The HOPE Lab tested this through an experiment with students at an online for-profit university. One group received information about student loans on paper, the other group watched videos.

"We were trying to see if maybe the videos were more informative and maybe that changed the amount people would borrow," he said. "Again there we found that it wasn't the case that people changed the amount they were going to borrow."

But a simple text message can make a difference. Advising services that send well-timed text messages reminding people to apply for financial aid have been proven to work.

"Sometimes you wouldn't be able to guess that giving people more money surprisingly doesn't have that big of an impact, but small things like a very well-targeted text message could have a large impact," Anderson said.

And so can emergency grants. The grants help low-income students overcome an unexpected financial burden that would otherwise force them to drop out of school, such as a medical bill or repairs for their vehicle.

The Legislature enacted such a program in 2016 to help students at Wisconsin's colleges and technical schools. To receive a scholarship, a student's expected family contribution on the Free Application for Federal Student Aid must be $5,000 or less.

A pilot of the emergency grant program at 16 Wisconsin technical colleges found that the money helped people stay in school and on-track to graduate. The law requires colleges to track the grant recipients academic careers after they receive assistance.

When the bill was first introduced, the HOPE Lab put out a statement to show its support of the measure.

"Micro-grants are intended to help students overcome financial emergencies and remain in school. Emerging research suggests that they can effectively help students survive financial emergencies and remain in college, and therefore we at the Wisconsin HOPE Lab support this proposal," the statement said.

Preparation is key

Finding programs that work is a balancing act for universities.

"Can we spend a pretty small amount of money, but target it well so that it occurs right at the point where people need it most? That's kind of the ideal — having a high benefit for a low cost," Anderson said.

However, Anderson said it all comes back to students and how prepared they are academically for college. If people are ready for the rigors of college coursework, they shouldn't let student loans scare them away from their futures.

"On an individual level, student debt is not always bad or scary. It can be a very good investment," he said.

Lundeen agrees.

The 19-year-old hopes to transfer to a four-year university after Fox Valley Tech and later attend law school. Knowing how much schooling is ahead of her and how much it could cost is why she took a gap year to save money, she said — she wants to give herself the best shot at success.

And she said she's motivated to put in the work.

"As it gets closer, I'm getting so much more excited to go back to school," she said.